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September 23, 2009

Subpoena for Fraudulent Spencer St Developer

191-Spencer-Street-0909.jpgThe courts issued a subpoena last week to developer Mendel Brach, whose residents won a $10.9 million judgment for his fraud and negligence at his four-building, 72-unit development on Spencer Street in Bed-Stuy. Brach had issued plans in 2002 for the buildings to be educational housing facilities, thus taking advantage of a zoning variance to build taller condominiums, The Real Deal reports. Additionally, Brach had failed to obtain a certificate of occupancy, amend his offering plan, and comply with zoning regulations. Without a certificate of occupancy, the residents who bought units at 191, 195, 197, and 201 Spencer Street cannot legally rent, sell, or refinance their homes. "We all closed in 2004 and we've all been paying our mortgages on what is a valueless property," unit owner Sara Monestime told The Real Deal. Brach, through his attorney, stated: "Recently, I consented to judgments on behalf of the attorney general and the unit owners for the buildings. I will continue to do everything in my power to help the attorney general and the unit owners bring the buildings up to the highest standards possible." Brach has said that he cannot afford the needed repairs, however, and the Department of Buildings has charged the homeowners with the responsibility of financing them. GMAP
Brach Hit with Subpoena at Spencer Street [Real Deal]




Posted by jscheff at 9:00 AM | Comments (12)
Categories: Bedford Stuyvesant, Developers

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Comments

Mendel Brach a la Finger building on N7th - this couldn't happen to a nicer guy.

Posted by: dittoburg at September 23, 2009 9:03 AM

Glad to see the guvment going after these fraudulent "educational facilities." Anybody think that the DOB has been on the take with these????

Posted by: daveinbedstuy at September 23, 2009 9:06 AM

How did the purchasers close without a C of O? Or is a C of O not required by lenders at the time of closing?

Posted by: InsertSnappyNameHere at September 23, 2009 9:19 AM

how would DOB be on take?...He didn't get what he wanted..
DOB can issue CofO - and apparently they didn't because of issues.

Posted by: Petebklyn at September 23, 2009 9:19 AM

In the past I meant. There have been many of these built and turned into condos over the years.

Posted by: daveinbedstuy at September 23, 2009 9:26 AM

not sure if DOB is involved in condoing process. He was trying to use zoning loophole. I don't know the process.
But I did see these with a friend who was looking for a place at the time. They did seem to indicate could get some discount on price or discounted mortgage if worked at Pratt (or maybe just in education). Did seem a bit tall for narrow street.

Posted by: Petebklyn at September 23, 2009 9:34 AM

2002-2005 Henry Radusky and Bricolage Design used the educational facility yeshiva dormitory scam to get bonus far at 266 23rd Street, 406-408 15th Street as well as the Spencer.

266 was built, received its C of O, and is now stands in violation of that C of O for renting the building out at market rates.

406-408 was beaten down to 5 stories after neighbors pointed out to DOB that they had erroneously approved the plans after the loop hole had been closed the year before. 406-408 is currently in violation of local zoning/C of O. by operating a commercial garage in the building's basement. A group of neighbors are suing the developer for damages to their homes during construction.

Looks like the DOB was fooled three times by this firm...

Why doesn't HPD make the repairs and bill the developer? Put a lean on his house.

Posted by: IMBY at September 23, 2009 10:17 AM

For the owner's perspective on this:

www.spencerstreetsaga.com

Posted by: streetwise at September 23, 2009 10:52 AM

Owner here.

Just an FYI - we all closed with a Temp C of O. There were (14) items for my particular building that needed to be resolved before the permanent C of O was issued. None of those items were reason to cause alarm or delay closing. You can visit the DOB website for buildings & check on all of these items for a building/unit you are purchasing - it is public record.

About 60 days after closing on our unit (my family was number 70 out of 72 units to close) the DOB revoked the temp C of O saying they 'missed' several important issues (none of which our very qualified home inspector picked up. Nor did our electrician). The DOB admitted error & we have no recourse against them. No one does. You can't sue the DOB in the city of NY. You can only sue the individual inspectors (good luck with that if you try).

There are identical buildings - 100% identical - on Skillman that have received their C of O. Same architect, same exact dimensions & layouts. Identical. No one at the DOB seems to be able to explain how that happened. Its kind of crap and the DOB is full of it & more than a little corrupt.

I will say that our condo (as are the others) is beautiful inside. I know the Brownstoner community feels differently about the outside. We LOVE our home. We worked HARD for it. You would never know that there was anything wrong with it. I work in Constuction & there is nothing wrong with the quality. We purchased this condo because, unlike alot of other people at the time, we were able to afford it & put 20% down & were responsible about the amount we were spending. It was big enough for our new family. We loved the neighborhood.

We have, after almost 5 years, outgrown the space. And the idea that we are 'stuck' is more than a little bit distressing. I have lived in wonderful NYC for over 12 years now and was so looking forward to raising my family here. Not one single city agency (those city agencies who are supposed to protect us) has helped us. Not one.

Posted by: spencer191 at September 23, 2009 12:11 PM

This is a shame and I expect there will be more horror stories of this sort (and of new buildings falling apart) in which the developers fade away leaving the residents holding additional expenses and/or the inability to transfer their property.

Posted by: orestes at September 23, 2009 2:15 PM

I'm a Real Estate Investor for over 10 years in Brooklyn and I have to say that I remembered having met with developers around Bed-Stuy trying to sell buildings without a full C of O.

I may be too conservative an Investor, but I always avoid situations where it is potentially possible for a building to be delivered with out one.

I remembered what surprised me mostly was that the developers had an association with Mortgage companies that allowed closings to occur without a full C of O, just a TCO. That's a practice that did not sit well with me. Too much room for collusion and corruption.

Now, here's the other problem I had. There seems to be a lot of workers in the DOB which come from the same religious back ground as the Developers. I always wondered how many of the developers were able to get permits for developing what I deemed to be illegal dwellings.

Personally, I think the DOB needs to be looked at carefully to see what are the relationships between the employees and the developers. I am almost sure that these are not "Arms length" (meaning no relationship) encounters and transactions.

Wasn't there a large amount of corruption that was exposed recently in New Jersey between the politicians, DOB and developers? Either case, all of this kept me away from those developments.

I was hoping that the owners of the Spencer Street developments would have an opportunity to expose the DOB's corruption, but it seems that the owners are generally happy with the developments other than the fact that there isn't a C of O.

So what happens is that the potential corruption can get buried and never investigated. The Application forms submitted to the DOB to build taller for Educational students will be forgotten even after you discover that almost none of the units were purchased by students/teachers, and the developer will be able to wash his hands clean of the dirt without losing any of the money he collected from the very owners who purchased his condos.

It goes to show you that the corruption is systematic and unfortunate for a lot of the owners, the Government won't pursue it further and they don't have the money and will to start their own investigation.

Posted by: InvestorLlew at September 23, 2009 4:05 PM

Hi - another owner here. We are not in anyway happy with the developments as the previous poster assumed. We have been sorely neglected by every branch of the government while Brach has been coddled. The result of this that after 5 years of working intimately with the AG, we are farther away than we were 5 years ago from attaining a CO. The situation is desperate because a few foreclosures are looming and once they start, we fear a domino effect.

I should also point out that Brownstoner has linked to and published an outright lie that really hurts our case: "DOB officials told the unit owners that they would have to finance the repairs themselves."

This absolutely false. The DOB has no concern whatsoever with who pays for repairs. All they care is that the repairs are done. Brach is contractually bound to pay for these repairs, but the AG seems only mildly interested in seeing him live up to this contract even though he walked away with over $25 million from the sales of our units.

Just to avoid the looming foreclosures, we WOULD pay for the repairs ourselves, but no bank will lend money to an "illegal" building.

Posted by: capone at October 16, 2009 5:43 PM

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